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[Federal Register Volume 89, Number 244 (Thursday, December 19, 2024)]
[Notices]
[Pages 103907-103910]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30166]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101911; File No. SR-ISE-2024-58]

Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
of Proposed Rule Change To Decommission QCC With Stock Orders and 
Complex QCC With Stock Orders

December 13, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 3, 2024, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I and II below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange to decommission Qualified Contingent Cross (``QCC'')

[[Page 103908]]

with Stock Orders \3\ and Complex QCC with Stock Orders.\4\
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    \3\ A QCC with Stock Order is a Qualified Contingent Cross 
Order, as defined in Options 3, Section 7(j), entered with a stock 
component to be communicated to a designated broker-dealer for 
execution pursuant to Options 3, Section 12(e). QCC with Stock 
Orders may only be entered through FIX and Precise. See Options 3, 
Section 7(t).
    \4\ A Complex QCC with Stock Order is a Qualified Contingent 
Cross Complex Order, as defined in subparagraph (b)(6), entered with 
a stock component to be communicated to a designated broker-dealer 
for execution pursuant to Options 3, Section 12(f). See Options 3, 
Section 14(b)(15).
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    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/ise/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to decommission QCC with Stock Orders \5\ and 
Complex QCC with Stock Orders.\6\
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    \5\ A QCC with Stock Order is a Qualified Contingent Cross 
Order, as defined in Options 3, Section 7(j), entered with a stock 
component to be communicated to a designated broker-dealer for 
execution pursuant to Options 3, Section 12(e). QCC with Stock 
Orders may only be entered through FIX and Precise. See Options 3, 
Section 7(t).
    \6\ A Complex QCC with Stock Order is a Qualified Contingent 
Cross Complex Order, as defined in subparagraph (b)(6), entered with 
a stock component to be communicated to a designated broker-dealer 
for execution pursuant to Options 3, Section 12(f). See Options 3, 
Section 14(b)(15).
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Background
    Today, ISE Members are able to transact QCC with Stock Orders and 
Complex QCC with Stock Orders subject to the provisions of Options 3, 
Section 12(e) and (f), respectively. The QCC with Stock Order (and 
Complex QCC with Stock Order) is a piece of functionality that 
facilitates the execution of the stock component of qualified 
contingent trades in connection with the execution of a QCC Order on 
the Exchange. Specifically, a QCC with Stock Order is defined as a QCC 
Order \7\ entered with a stock component to be communicated to a 
designated broker-dealer for execution pursuant to Options 3, Section 
12(e). A Complex QCC with Stock Order is defined as a QCC Complex Order 
entered with a stock component to be communicated to a designated 
broker-dealer for execution pursuant to Options 3, Section 12(f). 
Today, ISE Members desiring to execute an order with stock or an ETF 
component are required to enter into a brokerage agreement with a 
broker-dealer designated by the Exchange and are permitted to enter 
into such an agreement with one or more other broker-dealers to which 
the Exchange is able to route stock orders (this is also the case for a 
Complex QCC with Stock Order). Options 3, Section 12(e) and (f) 
describe how the stock component of QCC with Stock Orders and Complex 
QCC with Stock Orders, respectively, are executed on ISE. Since QCC 
Orders represent one component of a qualified contingent trade, each 
QCC Order must be paired with a stock transaction. When a Member enters 
a QCC Order, the Member is responsible for executing the associated 
stock component of the qualified contingent trade within a reasonable 
period of time after the QCC Order is executed.
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    \7\ A Qualified Contingent Cross (``QCC'') Order is comprised of 
an originating order to buy or sell at least 1,000 contracts that is 
identified as being part of a qualified contingent trade, as that 
term is defined in Supplementary Material .01 below, coupled with a 
contra-side order or orders totaling an equal number of contracts. 
QCC Orders will trade in accordance with Options 3, Section 12(c). 
See Options 3, Section 7(j).
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    QCC with Stock Order functionality is a voluntary piece of 
functionality that provides Members with an automated means of 
executing the stock component of a qualified contingent trade. 
Specifically, when a Member enters a QCC with Stock Order (or a Complex 
QCC with Stock Order), a QCC Order is entered on the Exchange. That QCC 
Order is automatically executed upon entry provided that the conditions 
of Options 3, Section 12(e) or (f), as applicable, are met. If the QCC 
Order (or Complex QCC Order) is executed, the Exchange will 
automatically communicate the stock component to the Member's 
designated broker-dealer for execution. Currently, Members that execute 
the options component of a qualified contingent trade entered as a QCC 
with Stock Order (or Complex QCC with Stock Order) remain responsible 
for the execution of the stock component if they do not receive an 
execution from their designated broker-dealer. Although QCC Orders (and 
Complex QCC Orders) are eligible for automatic execution, it is 
possible that the QCC Order (or Complex QCC Order) may not be 
executable based on market prices at the time the order is entered. If 
the QCC Order (or Complex QCC Order) is not capable of being executed, 
the entire QCC with Stock Order, including both the stock and options 
components, is cancelled.
Proposal
    At this time, the Exchange proposes to no longer offer Members the 
ability to execute QCC with Stock Orders or Complex QCC with Stock 
Orders on ISE. The Exchange was offering this functionality to Members 
on a voluntary basis to assist in their execution of qualified 
contingent trades. The Exchange notes that there has not been Member 
interest in this functionality for some time.\8\ There is no 
requirement that Members utilize QCC with Stock functionality, and 
Members will continue to be able to enter regular QCC Orders and 
Complex QCC Orders where the Exchange does not assist with the 
execution of the stock component of the trade and the Members do so 
themselves. After the Exchange decommissions the QCC with Stock 
functionality, Members would continue to be able to execute QCC Orders 
and Complex QCC Orders on the Exchange, provided that the Member would 
be responsible for executing the associated stock component of the 
qualified contingent trade in compliance with the requirements of the 
QCT exemption. The Exchange surveils for compliance with the QCT 
exemption.\9\ The

[[Page 103909]]

Exchange provided Members notice of its intent to decommission this 
functionality.\10\ There have been no concerns from Members with 
respect to the decommission.
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    \8\ There have been no trades utilizing QCC with Stock 
functionality in 2024 to date. There were less than 5 trades 
utilizing QCC with Stock functionality in the three prior years.
    \9\ See Securities Exchange Act Release Nos. 57620 (April 4, 
2008), 73 FR 19271 (April 9, 2008) (``QCT Exemptive Order''). See 
also Securities Exchange Act Release No. 54389 (August 31, 2006), 71 
FR 52829 (September 7, 2006). The QCT Exemption applies to trade-
throughs caused by the execution of an order involving one or more 
NMS stocks that are components of a ``qualified contingent trade.'' 
As described more fully in the QCT Exemptive Order, a qualified 
contingent trade is a transaction consisting of two or more 
component orders, executed as principal or agent, where: (1) At 
least one component order is an NMS stock; (2) all components are 
effected with a product or price contingency that either has been 
agreed to by the respective counterparties or arranged for by a 
broker-dealer as principal or agent; (3) the execution of one 
component is contingent upon the execution of all other components 
at or near the same time; (4) the specific relationship between the 
component orders (e.g., the spread between the prices of the 
component orders) is determined at the time the contingent order is 
placed; (5) the component orders bear a derivative relationship to 
one another, represent different classes of shares of the same 
issuer, or involve the securities of participants in mergers or with 
intentions to merge that have been announced or since cancelled; and 
(6) the Exempted NMS Stock Transaction is fully hedged (without 
regard to any prior existing position) as a result of the other 
components of the contingent trade.
    \10\ See Options Trader Update #2024-65.
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    The Exchange proposes to remove rule text related to QCC with Stock 
Orders and Complex QCC with Stock Orders in Options 3, Section 7(t); 
Supplementary Material to Options 3, Section 7(d)(3); Options 3, 
Section 12(e) and (f); and Options 3, Section 14(b)(15).
    The Exchange proposes to add a space after Supplementary Material 
.02 to Options 3, Section 7 before the title ``Time in Force.'' This is 
a technical amendment.
Implementation
    The Exchange intends to begin implementation of the proposed rule 
change on or before February 15, 2025. The Exchange will announce the 
date of the decommission to Members in an Options Technical Update.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\12\ in particular, in that it 
is designed to promote just and equitable principles of trade, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general to protect 
investors and the public interest.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that the proposed rule change 
is consistent with the protection of investors and the public interest 
because QCC with Stock Orders and Complex QCC with Stock functionality 
are currently offered to Members on a voluntary basis to assist in 
their execution of qualified contingent trades. Furthermore, Members 
that execute the options component of a Qualified Contingent Trade 
entered as a QCC with Stock Order or Complex QCC with Stock Order 
remain responsible for the execution of the stock component if they do 
not receive an execution from their designated broker-dealer. There is 
no requirement that Members utilize QCC with Stock or Complex QCC with 
Stock Order functionality, and Members will continue to be able to 
enter regular QCC Orders and Complex QCC Orders where the Exchange does 
not assist with the execution of the stock component of the trade and 
the Members do so themselves. The Exchange surveils for compliance with 
the QCT exemption.\13\
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    \13\ See supra note 9.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    Decommissioning QCC with Stock Orders or Complex QCC with Stock 
Orders does not impose an undue burden on intra-market competition. No 
market participant would be able to submit a QCC with Stock Order or 
Complex QCC with Stock Order on ISE. There is no requirement that 
Members utilize QCC with Stock functionality, and Members will continue 
to be able to enter regular QCC Orders and Complex QCC Orders. 
Moreover, Members will still be able to execute QCC Orders and Complex 
QCC Orders on the Exchange using other means to ensure the execution of 
the stock component of those qualified contingent trades. The Exchange 
believes that it will continue to remain competitive with other options 
markets despite not offering this functionality.
    Decommissioning QCC with Stock Orders or Complex QCC with Stock 
Orders does not impose an undue burden on inter-market competition as 
other options markets may offer this functionality to their Members.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative prior to 30 days from the date on which it was filed, 
or such shorter time as the Commission may designate, if consistent 
with the protection of investors and the public interest, the proposed 
rule change has become effective pursuant to Section 19(b)(3)(A)(iii) 
of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing.
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange states that waiver of the operative delay would permit 
the Exchange to decommission QCC with Stock Orders and Complex QCC with 
Stock Orders prior to the year's end so that the Exchange can 
discontinue maintaining the infrastructure associated with the 
functionality. The Exchange states that after it decommissions the QCC 
with Stock functionality, Members will continue to be able to execute 
QCC Orders and Complex QCC Orders on the Exchange, provided that the 
Member would be responsible for executing the associated stock 
component of the qualified contingent trade in compliance with the 
requirements of the QCT exemption. The Exchange surveils for compliance 
with the QCT exemption.\18\ The Exchange states that neither QCC with 
Stock Orders nor Complex QCC with Stock Orders has been utilized in 
2024.\19\ The Exchange further states that it provided Members notice 
of its intention to decommission the functionality, and that Members 
raised no concerns with respect to the decommissioning.\20\ For these 
reasons, and because the proposal does not raise any new or novel 
issues, the Commission believes that waiver of the operative delay is 
consistent with the protection of investors and the public interest. 
Accordingly, the Commission hereby waives the 30-day operative delay 
and designates the proposal operative upon filing.\21\
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    \18\ See supra note 9 and accompanying text.
    \19\ See supra note 8.
    \20\ See supra note 10 and accompanying text.
    \21\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).

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[[Page 103910]]

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \22\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \22\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-ISE-2024-58 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-ISE-2024-58. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-ISE-2024-58 and should be 
submitted on or before January 9, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-30166 Filed 12-18-24; 8:45 am]
BILLING CODE 8011-01-P
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